The flurry of new global financial reporting, GRC and ESG legislation is putting new pressure on businesses to consolidate and clean up their data and processes. Could generative AI help alleviate this pressure? Companies aren’t sure how to best use it, and the regulations themselves are still evolving.

This was on the minds of delegates at last week’s Amplify EMEA conference in Amsterdam, hosted by Workiva, which offers a cloud-based platform for integrated reporting in ESG, Financial Reporting and GRC (Governance, Risk and Compliance). The agenda highlighted trends for a rethinking of data, reporting and governance. In this complicated market, where a mix of consultants, auditors and vendors work closely with their clients, AI is starting to make an impact – especially in the ESG space, where data sources and processes are not as predictable as in financial reporting .

Speaking on a panel called “Can You Anticipate Regulatory Change?” Andie Wood, VP of Regulatory Strategy at Workiva, told delegates that even regulators are now trying to simplify the increasingly complex requirements of organisations. She says:

Over the past five years, a lot of new regulations have been introduced, and regulators have heard from companies that they have felt massively under pressure as a result. I’m not just talking about a big reporting regulation, but the whole suite of regulations under the Green Deal and the other environmental changes.

We hear them starting to talk about focusing on implementation. What will we do next? We have seen, in fact, that all commissioners have been mandated to specifically find reductions in the reporting burden. Therefore, we are very interested to know what they think is a reduction in the reporting burden. Everyone gathers. They decide what their new policy will be.

Data and robust processes will undoubtedly play an important role in the new regulatory frameworks, according to panel moderator Paul Dickinson, founder of CDP. He comments:

I talked earlier about how if you want to really make the best use of the almost limitless, almost unimaginable abilities of machine intelligence, artificial intelligence, then you need incredibly good data benchmarks now to be able to take advantage of that in future.

The growing role of generative AI

Especially with regard to ESG, having solid data and processes is an important step to enable generative AI to play a meaningful role. Naval Khana, director at PwC UK, says the technology could help companies meet their commitments in updated regulations such as CSDR and ISSB.

He presented figures at the conference from this year’s annual PwC CEO report, which found that 68 percent of CEOs believe generative AI will increase employee efficiency, and 44 percent expect it to increase profits. In the report, PwC says it is currently actively engaged with 950 of the top 1,000 US consulting clients and is now discussing its use and implementation with its audit clients. Khanna says:

Everyone has access to generative AI, and this has led to an unusual situation, a democratization of a new technology, where personal use of the AI ​​genre, such as ChatGPT, came before companies caught on. It’s unique and has a mass impact that corporations view with a mixture of excitement and trepidation.

Generative AI is already making inroads into content generation and analysis and interpretation according to Khana. He says trends such as interpreting data from multiple media inputs using AI agents that can handle text, video and audio inputs are having a major impact on efficiency. Domain-specific models such as Harvey in the legal arenaand AI systems using “Human in the Loop” models are also becoming more efficient.

However, Jeannette Gorzala, VP of the European AI Forum, told delegates that they needed to guide the technology until they were confident they could use the models and allay any fears of risk. She says:

Two-thirds of employees now secretly use ChatGPT at work, but only one-third of companies provide guidance to employees on how to best use AI. So there’s a gap, a kind of limbo, and for companies to get past the pain points and innovate using kind of AI, we need to have a top-down approach as well as the current bottom-up approach.

Gorzala, who represented more than 2,000 European AI companies during the legislative process of the EU AI Law, says the approach the Law takes will help organizations develop their systems based on risk. She comments:

Gen AI will be disruptive and there will be pain points in reporting, but data literacy will gradually develop and the use of Gen AI tools in specific fields will increase without adding any risk.

Different paths to adoption

But while these companies may need the efficiencies offered by generative AI-based platforms, it doesn’t make sense to start building their own generative AI systems from scratch, according to Simon Atherton, director of the CFO Advisory practice at Deloitte UK. He believes it makes more sense for organizations to use software companies like Workiva that incorporate generative AI into their platforms. He says:

In certain areas, such as the front office, we all interact with organizations that are already using gen AI. But from a financial and GRC perspective, I think people are just trying to understand what the use cases are. My guess is that most will never buy or build their own next generation AI apps, but will use them when companies like Workiva embed them into their platforms.

He draws a parallel with the advent of Robotic Process Automation (RPA):

There was a massive trend for RPA software about 5 years ago. Everyone was going to use RPA. In fact, I don’t think many people in finance are using RPA, because the way you produce reports, how you raise invoices, how you pay invoices, how you do journals all need the same organization.

So, I think vendors will build AI gen into their platforms. That’s how finance works. If Workiva builds something that uses AI, it’s all about risk. Workiva will say, “I’ve tested this. We have these protocols. That’s it, otherwise you have to build it yourself.’ It makes no sense to build it yourself.

Workiva’s Wood says organizations are unsure about incorporating generative AI into their reporting processes right now, but it has become a learning process. She comments:

There is uncertainty. To what extent can AI really design? Does it produce a high-quality disclosure? Does it produce a joint disclosure? But we certainly see it being used to produce the initial outline and then circumstances. I think it’s definitely helping already, but we’re still learning.

The European AI Forum’s Gorzala believes it will be essential for companies to lead their employees on that learning journey if they want to use generative AI effectively and safely to meet their regulatory obligations. She says:

The disruption generated by AI will drive innovation and offer a lot of potential to achieve more and benefit organizations. Taking employees on the learning journey is an important first step. Massive real-time savings will be made in automating real-time reporting of information sources and using next-generation AI tools for compliance.

My appreciation

Delegates at the Workiva Amplify EMEA conference are quite fed up with the ever-changing global regulations affecting them. And while financial reporting has gradually evolved over several decades, the ESG space offers all sorts of additional concerns, including the robustness of the various data sources and processes it must now contend with. One delegate told a panel that he was tired of constantly thinking about risk and wanted to start thinking about creating business value.

It doesn’t make sense for these organizations to start incorporating generative AI from scratch. They should start embracing this disruptive technology as it grows through the platforms they already use. Providers like Workiva and management consultants and auditors working in this area are ready to step up.